Bonds are debt instruments issued by entities to raise capital, where the issuer promises to pay periodic interest (coupon) and repay the principal at maturity.
Types of Bonds:
- Government Bonds: Issued by national governments and considered low-risk investments.
- Examples: U.S. Treasury Bonds, UK Gilts, German Bunds.
- Subtypes:
- Treasury Bills (T-Bills): Short-term bonds (<1 year).
- Treasury Notes (T-Notes): Medium-term bonds (2–10 years).
- Treasury Bonds (T-Bonds): Long-term bonds (>10 years).
- Examples: U.S. Treasury Bonds, UK Gilts, German Bunds.
- Subtypes:
- Treasury Bills (T-Bills): Short-term bonds (maturity < 1 year).
- Treasury Notes (T-Notes): Medium-term bonds (maturity 2–10 years).
- Treasury Bonds (T-Bonds): Long-term bonds (maturity > 10 years).
- Municipal Bonds (Munis): Issued by state or local governments to fund public projects, often offering tax advantages, such as exemption from federal and state taxes on interest.
- Corporate Bonds: Issued by companies, with risk and return varying based on the issuer’s creditworthiness.
- Investment-Grade Bonds: High credit ratings, lower risk.
- High-Yield Bonds (Junk Bonds): Lower credit ratings, offering higher risk and potential returns.
- Emerging Market Bonds: Issued by governments or companies in developing countries, offering higher yields but carrying greater risk.